Christy,
There was a poll conducted on this site not too long ago about using rotation with pre-schoolers. I wonder what the results were? Do a search and see what you can find out!
We are yet another of those congregations doing godly play with ages 3 to 6 for four years now. Our children learn the stories and are able to retell them, in addition to learning how to worship much as we do "upstairs". We have a smaller team of leaders for them and they stay in one room -- which we feel is best for that age.
This summer we will use our rotation space for all ages but split them into appropriate groupings by age where necessary. I think the older "godly players" (my son included) will be excited to have a glimpse of what it's like to be in the big kids space!
Blessings,
Hilary